The Issue Should the Florida Real Estate Appraisal Board (the Board) take action against Respondent, a licensed real estate appraiser (appraiser), for violations set forth in Chapter 475, Part II, Florida Statutes (1995)?
Findings Of Fact Stipulated Facts: Respondent is a state-licensed appraiser. On or about January 9, 1997, Victor Harrison, Respondent and Rhonda Guy developed and communicated an appraisal report for property commonly known as 693 Broad Street, Pensacola, Florida 32819. In developing the subject property appraisal report, the Cost Approach and the Sales Comparison Approach were utilized. Additional Facts: Eventually the circumstances concerning the Uniform Residential Appraisal Report (the Report) at the 693 Broad Street, Pensacola, Florida, property (the Property) came to Petitioner's attention upon a complaint. On February 13, 2001, the complaint was made. The complaint was made by Daniel Alvin Ryland, a Florida-licensed appraiser, who has provided appraisal services in Escambia and Santa Rosa counties in Florida. The investigation of the complaint covered the period February 20, 2001, through December 26, 2001. Benjamin F. Clanton was the principal investigator. At present, he is an investigator supervisor for Petitioner. He has held that position since 2002. Mr. Clanton started investigating appraisal cases in 1995, when he retired from the Birmingham Police Department in Birmingham, Alabama. In that year, he was employed by the Alabama Real Estate Appraisal Board. While there, he took three courses: the Appraisal of Real Estate, a 45-hour course; the Basic How to Appraise, a 25-hour course; and Uniform Standards of Professional Appraisal Practices (USPAP), a 16-hour course. He took an update in USPAP in 1997, a four-hour course. Mr. Clanton continued with Appraisal Institute courses or courses involving appraisal principles and procedures, basic income capitalization, residential case studies and a national USPAP course and other updates. As part of the investigation Mr. Clanton interviewed Respondent Victor Harrison, DOAH Case No. 06-3387PL. Mr. Clanton sought documentation from that Respondent in the interest of the recreation of the Cost Approach in the Report. Mr. Clanton asked for the work files supporting the Report. That Respondent provided work files. Discrete information concerning recreation of the Cost Approach was not received by Mr. Clanton. From his observations related to the Cost Approach within the Report, Mr. Clanton describes problems with the calculations of the Cost Approach where the stated effective age in the comments on the Cost Approach was 25 years. That calculated to be significantly different, in his understanding, than the number used in the depreciation in the Cost Approach. The Report reflected a remaining economic life of 35 years and a total life expectancy of 60 years. He refers to the Report's statement of the effective age of the Property as 15 years. In his testimony, Mr. Clanton describes the age life depreciation method leading to establishment of the effective age, but he was never qualified as an expert to allow consideration of the testimony on the age life depreciation method or other issues related to the Cost Approach. Therefore no further facts are found on that topic. When interviewed by Mr. Clanton, Respondent acknowledged that there were errors in the Cost Approach formulations attributed to Respondent, Victor Harrison, DOAH Case No. 06- 3387PL. The nature of any errors was not explained. Without that explanation they become inconsequential. More particularly, the Property neighborhood is slightly north of Interstate 10 in Pensacola, Florida, west of Pine Forrest Road, to the west side of Highway 29, and south of Alternate 90. The Property is located in what is referred to as the Ensley area. The Property is one of the largest residences in the Ensley area, in particular in Ensley Gardens. Immediately off of Highway 29 are rows of commercial buildings. Behind those rows is a railroad track. The Property is about 200 feet from the railroad track. An Escambia County utilities substation, pumping station, is located north of the Property. The Escambia County public utilities facility is about 200 feet from the Property. The Property is located north of Broad Street. The Property is on a large lot. Homes across from the Property on Broad Street are located on smaller lots. The property is not in a Planned Unit Development (PUD). The area of the subject property is not homogenous, in that the homes vary widely in quality, design, age and size. By choice of the appraiser, the Sales Comparison Approach was used in determining the appraisal for the Property. There were three comparable sales. At the time the Report was written the Property was 27 years old. Comparable sale one was two years old. Comparable sale two was 12 years old. Comparable sale three was 9 years old. The Property site was 120 feet by 260 feet according to the Report. This was larger than the comparable sales sites. Respondent Victor Harrison, DOAH Case No. 06-3387PL, in providing information from the work file related to the Report, included information from a Multiple Listing Service (MLS) for January 1997 from the Pensacola Association of Realtors. In reference to comparable sale one, the MLS refers to the location as Creekside Oaks Subdivision, a luxury home under construction and a Parade Home entry. It refers to a sprinkler system, pantry, cathedral ceilings, security alarm, two+ closets in the master bedroom, separate shower in the master bedroom, an open patio, laundry/utility room, on a golf course, with a two-car garage. It has a whirlpool for the master bedroom bath. It has double pane glass. In relation to comparable sale two, the MLS refers to soaring cathedral ceilings with a fireplace in living room and screen porch, a hot tub and gorgeous yard with pool. The pool is described as an in-ground pool. There is a reference to a unique atrium, an inside laundry, walk-in closets, sprinkler systems, laundry/utility room and security alarm. The MLS pertaining to comparable sale three refers to the Kings Road Subdivision in Cantonment, whereas the Report refers to the location as Pensacola. In relation to comparable sale three on Kings Road in Cantonment, that neighborhood has deed restrictions limiting the type of homes and the size of homes. It has a public sewer. It has underground utilities. It has a concrete curb and gutter. The house is described as having a fireplace, sprinkler system, screen porch, high ceilings, security alarm, two-car garage, with a garden tub in the master bath. It refers to a laundry inside. There is a pool. The Report in the section under the Comparable Sales Approach, under the sales comparison analysis that refers to design and appeal described the Property and the comparables as ranch/average. The Property and the comparable sales properties were all described as suburban-average as to location. The sites were described as average for the Property and inferior for the comparables with a $3000 positive adjustment in each comparable sale to compensate for the difference. The Property did not have a pool. Two of the comparable sales had pools. Mr. Clanton asked the Respondent, Victor Harrison, DOAH Case No. 06-3387PL, to provide him with a second appraisal report on the Property. Respondent agreed to provide it and mailed it to Mr. Clanton. A second appraisal report was not received by Mr. Clanton. Nothing more is known about a second appraisal report. In the appraiser certification signed by Respondent Victor Harrison, DOAH Case No. 06-3387PL, as appraiser, and signed by Respondent, as supervisory appraiser, under item 8 it was stated: "I have personally inspected the interior and exterior areas of the subject property . . . ." Within item 8 to the appraisers certification, it went on to say that there was a personal inspection of " . . . the exterior of all properties listed as comparables in the appraisal report " Respondent, Victor Harrison, DOAH Case No. 06-3387PL, did not inspect the interior of the Property as part of the appraisal, by contrast to an awareness of the exterior. Respondent served as the supervisory appraiser and as such did not inspect the Property in any respect. Respondent reviewed comparable property data in relation to the sales comparison analysis but was not involved in the selection process in choosing comparable sales. The form used in preparing the Report is referred to variously as Freddie Mac Form 70 6/93 and Fannie Mae Form 1004 6/93. In the Report in the section involving subject matter, Fred and Juanita Hicks were listed as borrowers and the current owners of the Property. The property rights being appraised were under the heading "fee simple." There was a reference to a lender/client as Home Star Mortgage Lending. The results of the Report did not lead to any direct harm to a consumer, in particular, the listed borrowers, Fred and Juanita Hicks.
Recommendation Upon consideration of the facts found and the conclusions of law reached, it is RECOMMENDED: That a final order be entered dismissing the Administrative Complaint against Respondent. DONE AND ENTERED this 30th day of May, 2007, in Tallahassee, Leon County, Florida. S CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of May, 2007.
The Issue The issue for determination is whether Petitioner should be assessed sales and use tax for the audit period May 1, 1997 through April 30, 2002, per the Notice of Proposed Assessment dated July 3, 2003.
Findings Of Fact Wales is a Florida S corporation. Its principal place of business is located at 2916 Southeast 6th Avenue, Fort Lauderdale, Florida. Wales' federal employee identification number is 59- 1703273. Wales' Florida sales and tax number is 16-03-095273- 26/1. By letter dated June 6, 2002, the Department issued to Wales a Notice of Intent to Audit Books and Records (Notice of Intent). The Notice of Intent identified the audit number as A0205310975. On July 10, 2002, the Department's auditor assigned to perform the audit conducted an initial interview with Wales. The auditor discussed, among other things, the audit and sample methods that would be employed during the audit. On August 13, 2002, the auditor began examining Wales' books and records at Wales' business location. Wales was cooperative during the audit. Wales provided all available books and records for the audit. The sole shareholders of Wales are Stewart Levy and Diane Levy. Wales leased its business location from Element Two Enterprises, Inc., ( Element Two) a related entity. Stewart Levy and Diane Levy are also the sole officers of Element Two, president and secretary, respectively. Element Two is the record owner of the improved real property located at 2916 Southeast 6th Avenue, Fort Lauderdale, Florida, (realty). The address for the realty is also the address for Wales' place of business. Element Two mortgaged the realty leased by Wales. Wales paid monthly monetary consideration to Element Two in lease payments, which directly correlated to the amount of the monthly mortgage payments. Ad valorem taxes and property insurance were included in the monthly mortgage payments. Wales paid the ad valorem taxes and property insurance on the leased property. The lease payments to Element Two by Wales included the amount of the ad valorem taxes, property insurance, and common areas of maintenance. Wales did not pay sales tax on any of the lease payments to Element Two. Element Two did not charge or remit sales tax to the Department on the lease payments by Wales. Element Two was not registered with the Department as a dealer. Only dealers that are registered can remit sales tax on lease payments. Consequently, Element Two could not remit sales tax on the lease payments by Wales. Wales did not utilize all of the property it leased. Wales sub-leased a portion of the leased property to an unrelated entity. A prior sales and use tax audit was conducted of the sub-lessee, which included the period May 1997 through December 1998. The Department examined the sublease audit to determine whether Wales owed additional sales tax. The Department's examination of that audit revealed that the sales and use tax on the rent paid by the sub-lessee for the period May 1997 through September 1998 was assessed and paid by the sub-lessee. For the period May 1997 through December 1998, Wales had neither charged or collected sales tax nor remitted sales tax to the Department on the sub-lessee's payments. No sales tax was charged or paid on the sublease payments for the period October 1998 through December 1998. From January 1999 through April 2002, Wales charged, collected, and remitted sales tax on the sublease payments. The Department credited Wales for sales tax already paid on the subleased portion for the period May 1997 through September 1998 and January 1999 through April 2002. On its general ledger, Wales posted the lease payments to Element Two as rent payments. Element Two posted the lease payments to its general ledger as rent income. On its federal income tax returns, Wales reported the lease payments to Element Two as rent expense. Element Two reported the lease payments on its federal income tax returns as rent income. On November 29, 2002, the Department issued to Wales a Notice of Intent to Make Audit Changes for audit number A0205310975. Wales requested and the Department agreed to hold an audit conference to discuss the audit findings. Wales claimed that rent payments made were not subject to sales tax because both Wales and Element Two signed the mortgage and promissory note on the realty leased by Wales. However, only Element Two was reflected as the borrower on the loan and only Element Two was the signatory on the mortgage even though both Wales and Element Two signed the promissory note. On January 10, 2003, Wales executed a Consent to Extend the Time to Issue an Assessment or to File a Claim for Refund (Consent). The Consent extended the statute of limitations for the period of time in which an assessment may be issued or a claim for refund may be filed to December 31, 2003. On July 3, 2003, the Department issued, by certified mail, the Notice and an Addendum to Proposed Assessment for audit number A0205310975. The Notice provided, among other things, for the assessment of sales and use tax in the amount of $17,481.73; penalty in the amount of $8,741.10; interest in the amount of $5,756.03, with additional daily interest being computed at the rate of $3.54 per day from July 3, 2003; and a total assessment in the amount $31,978.86. On September 1, 2003, the Notice became a Final Assessment for audit number A0205310975. Wales contested the Final Assessment and requested a hearing. Wales is not contesting that part of the audit which found that Wales failed to pay sales tax on certain fixed assets purchased for use in its business. At hearing, Wales contended that its federal income tax returns could be amended to reflect the payments to Element Two as mortgage payments instead of rent payments, which would, in turn, change the Department's audit to reflect the payments as mortgage not rent. To address this contention, the Department presented the testimony of an expert witness in the area of rental consideration and sales tax audits. The Department's expert testified that the consideration for rental or use of property is the payment between/to one who owns the real property and/from one who uses the property; and concluded that consideration, as rental, was provided to Wales by Element Two based on the Department's taxing statute, Section 212.031, Florida Statutes, and its rules and regulation, Florida Administrative Code Rule 12A-1.070. The expert opined that the mortgage payments were consideration for a lease or license to use the real property and that, therefore, the monthly lease payment, which equaled the monthly mortgage payment, paid by Wales to Element Two was consideration for the lease or license to use the realty. The expert's testimony is found to be credible. The evidence presented shows that the mathematical computations performed by the Department in its audit are correct. Further, the evidence shows that the mathematical computations as to tax, penalty, and interest assessed are correct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue's assessment of sales tax, interest, and penalty against Wales Garage Corporation be sustained and that the Department of Revenue enter a final order assessing sales tax, interest, and penalty against Wales Garage Corporation for the period May 1, 1997 through April 30, 2002, consistent herewith. DONE AND ENTERED this 27th day of May, 2004, in Tallahassee, Leon County, Florida. S ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of May, 2004. COPIES FURNISHED: Gerald S. Schnitzer GSS Advisory Services, Inc. 2455 East Sunrise Boulevard, Suite 502 Fort Lauderdale, Florida 33304 Carrol Y. Cherry, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact Mini-Warehouses at Kendall, Ltd. d/b/a A+ Mini-Storage (KENDALL) is a Florida partnership maintaining its principal place of business at 12345 S.W. 117th Court, Miami, Florida. DOT is a decentralized state agency. It has established several districts of which District 6, Dade County, is one. DOT's central office is located in Tallahassee, Florida. At all times material hereto, KENDALL held title to all privately owned real property, hereinafter abutting parcel, located adjacent to real property owned by the Florida Department of Transportation (DOT), hereinafter surplus property, situated in Dade County, Florida. Surplus properties are oddly-shaped strips of land left over from parcels acquired by the State of Florida. The subject surplus property is of no use to the State and can only be used for a few economic purposes. It has utility value for the abutting property. KENDALL's abutting parcel is fully developed with buildings divided into mini-storage units being rented to the public and is zoned IU-C, Industrial/Conditional - Manufacturing. The east side of KENDALL's property abuts the surplus property. The surplus property and the abutting property are located in DOT's District 6. DOT identifies the surplus property as parcel no. 0739 which is a long, narrow right-of-way, consisting of .927 acres. It is 29 to 67 feet wide and approximately 950 feet long. The surplus property is zoned EU-M, Residential. On June 28, 1985, DOT and KENDALL entered into a written surplus property lease (original lease) for the subject surplus property. The original lease was automatically renewable and could be cancelled by either party with 30 days prior notice. Leasing the surplus property allowed KENDALL to reduce the amount of damage that the state's storm water runoff would otherwise cause to its abutting property. KENDALL was required by the original lease to pay DOT $2,400 annually, plus sales tax, for the use of the surplus property. KENDALL made the payments from 1985 to 1991. By letter dated May 3, 1991, DOT's District 6 office informed KENDALL that: (a) the original lease was unilaterally terminated; (b) KENDALL would be required to execute a renewal lease for 5 years with an option to renew for 5 more years, at an annual rate to be determined; (c) KENDALL might want to hire an independent appraiser from DOT's approved list of independent fee appraisers; and (d) KENDALL would have to negotiate a fee with the appraiser. Wanting to continue to lease the surplus property, KENDALL chose an appraiser from DOT's approved list of independent fee appraisers and hired him to appraise the surplus property. Per DOT's instructions, the independent appraiser contacted District 6's chief review appraiser for further instructions regarding the appraisal. The appraiser hired by KENDALL had a long working relationship with DOT. Throughout the 1980's to 1991, DOT and District 6 had accepted surplus property appraisals, without exception, from the appraiser that: (a) used only the contributory value method as a starting point in the appraisal process for fair market rent; (b) determined the fair market value that the surplus property would bring in a sale open to the public; and (c) made necessary market-based adjustments to arrive at a final figure, which was somewhere between the figure obtained in (a) and the figure obtained in (b), which represented the fair market rent for the surplus property. However, involving the surplus property at KENDALL, District 6's chief review appraiser informed the independent appraiser that only the unmodified across the fence or contributory value method would be acceptable when estimating rent that DOT should seek for the surplus property. Moreover, the chief review appraiser informed him that any other method would result in his appraisal being rejected. The chief review appraiser informed the independent appraiser that the factors to be used and considered were: (a) the surplus property's contributing value to KENDALL, as if the abutting property was vacant; and (b) a market rate of return based on the contributing value to KENDALL for fee simple ownership in perpetuity even though the renewal lease only conveyed surface rights, subject to a 30-day cancellation clause. In other words, District 6's chief review appraiser was instructing KENDALL's appraiser to use the across the fence appraisal method. This appraisal technique involves the following actions: Estimate the market value of the surplus property and the abutting property, as assembled. Estimate the market value of the abutting property, as it exists (without the surplus property added). Subtract the estimated market value of the abutting property, as it exists, from the estimated market value of the assembled abutting and surplus properties. The difference between the two value estimates should yield a supportable indication of market value for the surplus property. KENDALL's independent appraiser followed the instructions of the chief review appraiser for DOT's District 6. Because of the very limited market data for surplus property leases, KENDALL's appraiser requested DOT's surplus property lease data for Dade County from the chief review appraiser; however, he received no response to his request. Without the requested data, KENDALL's appraiser was unable to use a lease data comparison. In his appraisal, he relied upon market data of the sales of commercial land, exclusively, and determined that the surplus property's highest and best use is to serve as a storage yard for parking trailers and boats, assuming the surplus property could be rezoned or a variance obtained to permit that use. Based upon the assumption of vacant or undeveloped commercial property and rezoned or variance surplus property for commercial use as a storage yard, the independent appraiser determined that the market value of the surplus property in fee simple was $128,000. He further ascertained that an investor would be satisfied with a 10 percent yield and determined that the across the fence value is an annual rent of $12,800 for a 50 to 100 year lease term, which is the prevailing market rent for the surplus property. The appraisal was accepted by DOT. Not agreeing with the across the fence method, KENDALL obtained approval from DOT for the submission of a second appraisal for the surplus property. DOT agreed but on the condition that the second appraisal had to be submitted by December 31, 1991. For the second appraisal, KENDALL'S independent appraiser used the method which he used previously and which was historically accepted by DOT. Again, he determined that the highest and best use of the surplus property was a storage yard, assuming that it could be rezoned or a variance obtained to permit such use. He then determined, as before, that the contributory value (across the fence) value of the surplus property in fee simple was $128,000. Subsequently, the appraiser determined that the fair market value of the surplus property was $32,000 if rezoned and sold in fee simple to the public, including KENDALL. Finally, contrary to the first appraisal, the appraiser determined that the fair market rent for the surplus property was $3,000 a year if the entire parcel could be used as a storage yard and that the surplus property would only produce a nominal rent of $100 a year if leased to the general public. The second appraisal was submitted by DOT's imposed deadline. By letter dated October 9, 1991, the chief review appraiser for DOT's District 6 notified all approved appraisers on its list, including KENDALL's independent appraiser, of the surplus property appraisal policy that would be used. It states in pertinent part: SUBJECT: A STATEMENT OF DISTRICT APPRAISAL POLICY SURPLUS PROPERTY APPRAISALS - THE VALUATION PROCEDURE [I]t is inequitable to examine surplus properties without some evaluation of the abutting property. To be consistent in the appraisals for acquisition and those for sale by the Florida Department of Transportation, subjects should be estimated at their "ATF" or "Across The Fence" value. The surplus property appraisals should be addressed in the same way a "before and after" appraisal is conducted. The current Right of Way Appraisal Standards would be applicable in this assignment. The recommended appraisal procedure for surplus properties will be: Estimate the market value of the surplus property and the abutting property, as assembled. Estimate the market value of the abutting property, as it exists (without the surplus property added). Subtract the estimated market value of the abutting property, as it exists, from the estimated market value of the assembled abutting and surplus properties. The difference between the two value estimates should yield a supportable indication of market value for the surplus property. This process is logical and it appears to be reflective of the market. The appraisal problem is complicated by this procedure, but the result should be a more accurate and consistent estimate of market value of surplus property. In late 1991 or early 1992, KENDALL started the process to obtain a variance from Dade County. In accordance with DOT's requirement, KENDALL absorbed the costs associated with obtaining the variance. As of the date of hearing, KENDALL had expended between $10,000 and $15,000. Generally, the landowner is responsible for obtaining the variance or rezoning necessary for a lessee to use a leased parcel for its highest and best use. However, if the landowner is not obtaining the variance or rezoning, generally, the lessee receives a reduced rental rate. In July 1992, the chief review appraiser for DOT's District 6 notified KENDALL that the second appraisal was rejected. He rejected the appraisal without reviewing it. Based on the accepted appraisal, DOT determined that the prevailing market rent for the surplus property was $12,800, plus tax, annually and assessed KENDALL accordingly. Wanting to continue to use the surplus property, KENDALL paid DOT $2,544 as partial payment of the annual rent, plus tax, for the initial year of renewal beginning June 28, 1991 and paid $24,617 for outstanding rent, plus tax, for the period June 28, 1991 through June 27, 1993. KENDALL has continuously paid the annual rent required by DOT. In May 1994, Dade County issued KENDALL a conditional variance. Assuming KENDALL satisfies numerous local concurrency and planning requirements, the final variance will permit it to use no more than 60 percent of the surplus property for storage purposes. Until rezoning or a variance is obtained, the market rent of the surplus property is $100 to $500 annually according to KENDALL's appraisers. A real property appraisal is expected to use an appraisal technique which reveals the maximum market value at a given time for the property being appraised. Several appraisal techniques are recognized and accepted by the appraisal profession, including across the fence method or technique. The appraiser initially determines the highest and best use of the parcel being appraised. Then, the sale value of the parcel is determined. The appraised market value is the base for establishing a market rental value for the property. The appraisal technique or method for surplus property can vary from parcel to parcel. Appraisal methods or techniques other than the across the fence method have been used by other DOT approved appraisers when appraising the fair market value for surplus property and have been accepted by DOT. Usually, surplus properties have a higher value when a contributing value appraisal technique (across the fence technique) is used because such properties are generally small in size and irregular in shape. The prospective buyer for surplus property is generally limited to the abutting parcel user or its competitors. District 6's chief review appraiser erroneously refused to consider any other appraisal value method, other than the across the fence method, to value the surplus property. DOT admits that its chief review appraiser in District 6 should not have required KENDALL's independent appraiser to use only the across the fence method to determine fair market rent for the surplus property. For the subject surplus property the market data for leases of DOT's surplus properties in Dade County would have been appropriate data to use in the appraisal. Even though DOT failed to provide KENDALL's appraiser with the market data, DOT did have such data for four leases executed between October 1989 and January 1991. These leases, as is KENDALL's lease, were only for surface use, subject to a 30-day cancellation clause. The data showed that the cancellation clause significantly reduced the market rental rate when leasing surplus property and that the market rental rate of return was between 1.89 percent and 2.62 percent per year to the respective owners. The data from DOT's surplus property leases would have been used by KENDALL's appraiser if it had been provided to him. Based upon the data of the surplus property leases, KENDALL's appraiser determined that the owner of the surplus property would receive annual rent equalling between 1.89 percent and 2.62 percent of the amount that the surplus property would produce if it was fully developed as commercial property and sold in fee simple. In February 1994, KENDALL obtained the services of another appraiser from DOT's approved list of independent appraisers to perform an independent appraisal for the fair market value of the surplus property for the period beginning July 1, 1991. Prior to obtaining his services, KENDALL did not request DOT to accept another appraisal. First, the appraiser determined that comparably-sized commercial property in Dade County, providing maximum utility, had a fair market value of $140,000 in a fee simple sale. Next, he determined that the highest and best use of the surplus property was for storage purposes, which reduced the value of the surplus property in fee simple by 57 percent. Even though the appraiser determined that KENDALL was the logical purchaser of the surplus property, he also determined that, due to KENDALL having fully developed its abutting property and not being able to economically build on the surplus property, the surplus property would not provide a maximum utility to KENDALL's abutting property. Based upon such market factors, the appraiser determined that the surplus property had a fair market value of $35,000 if sold in fee simple for storage purposes. Therefore, assuming a variance or rezoning could be obtained by KENDALL to use the surplus property for storage purposes, the appraiser determined that the fair market rent for the surplus property was $3,500 as of July 1, 1991. DOT never performed an appraisal of the surplus property.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that DOT enter a final order that the market rental value assessed to the surplus property leased to and paid by KENDALL is invalid, as exceeding prevailing market rent, that the prevailing market rent for the surplus property is $3,000 annually and that DOT refund to KENDALL the difference between a market rent of $12,800 annually and $3,000 annually, beginning in November 1993. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 2nd day of March 1995. ERROL H. POWELL Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 2nd day of March 1995
Findings Of Fact At all times material hereto, Petitioner has been in the business of manufacturing and selling extruded aluminum patio furniture. Petitioner is owned by Robert L. Gass, Jr., who was also the owner of the real estate which Petitioner occupied as a tenant. It was necessary for the Department to acquire the real property owned by Gass and to relocate Petitioner as a result of a federally-funded highway construction project, I-595 in Broward County, Florida. Accordingly, Gass and Petitioner became entitled to benefits pursuant to the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970. Pursuant to a contract with the Department, employees of Kaiser Engineers were responsible for both the acquisition of real property and the relocation of personal property of businesses and persons displaced by the I-595 project. Some of Kaiser's employees were involved with acquisition (acquiring ownership of real property) and different employees were responsible for relocation assistance (relocating personal property). An appraisal of the land and improvements at the manufacturing site was performed on behalf of the Department. The Department's real estate appraiser called in a machinery and equipment appraiser to appraise certain "immovable business fixtures and special purpose process systems." The machinery and equipment appraiser prepared an appraisal containing 20 categories/items, consisting primarily of the components of Petitioner's painting machinery and assembly line. A three-page listing of those 20 categories/items was compiled and became entitled "Inventory." Gass and the Department entered into negotiations for the acquisition of his real property. Gass was concerned about the "down time" Petitioner would incur if Petitioner were required to disassemble, move, reassemble, and install its assembly line and painting system process. It was important to Gass that Petitioner have a replacement assembly line and painting system process operational before moving to the relocation site. Gass was aware of the relocation benefit under which a displaced business might be eligible to purchase new equipment and machinery and have it fully installed and operational before the business is physically relocated. On August 22, 1988, Gass entered into a Right-of-Way Purchase Agreement with the Department under which the Department purchased from Gass the real property which was Petitioner's manufacturing site. Exhibit "A" to the Right- of-Way Purchase Agreement was the Inventory of the 20 categories/items prepared by the machinery and equipment appraiser. Petitioner subsequently made application to the Department for relocation benefits to purchase replacement items for the categories/items contained in the Inventory. The Department denied that claim for relocation benefits, and Petitioner timely requested a formal hearing regarding the Department's determination. The matter was thereafter transferred to the Division of Administrative Hearings where it was assigned DOAH Case No. 90-8112. In that dispute, the Department took the position that the 20 items in the Inventory were immovable trade fixtures and, therefore, items of real property, that those items had been purchased by the Department as part of its acquisition of the real property, and that Petitioner was entitled to no relocation benefits relative to those items. Petitioner, on the other hand, contended that the Inventory items were personal property, that they were not converted into real property because the Right-of- Way Purchase Agreement referred to them, and that Petitioner, through Gass, had specifically reserved its right to receive relocation benefits regarding those items due to negotiated language which Gass had required and which was included in the Addendum to the Right-of-Way Purchase Agreement. The threshold issue to be adjudicated in the underlying proceeding was whether the items of property listed in the Inventory were items of personal property, as Petitioner contended, or trade fixtures and items of real property, as the Department contended. Expert real property appraisers and expert machinery and equipment appraisers testified in the evidentiary hearing. The one area of agreement among them was that whether a piece of equipment is considered real property or personal property is a "gray area." On September 12, 1991, a Recommended Order was entered in DOAH Case No. 90-8112. That Recommended Order determined that all of the items listed in the Inventory were items of personal property, that the Right-of-Way Purchase Agreement was ambiguous, and that Petitioner was entitled to relocation benefits for substitute personal property in the amount of $275,900. On December 10, 1991, the Department entered its Final Order essentially adopting the Recommended Order. The Final Order specifically held that all of the items listed in the Inventory were items of personal property and that Petitioner was entitled to relocation payments for substitute personal property in an amount not to exceed $275,900 upon submission of the appropriate documentation. At the time that the Department denied Petitioner's claim for relocation benefits regarding those items listed in the Inventory and advised Petitioner of its right to request an administrative hearing regarding that determination, the Department believed, in good faith, that it had purchased the 20 categories/items listed in the Inventory as part of its acquisition of the real property at Petitioner's manufacturing site. At that same time, the Department believed, in good faith, that the 20 categories/items listed in the Inventory were not items of personal property and that Petitioner was not, therefore, entitled to relocation benefits for that personal property. At the time, the Department's decision to deny Petitioner's claim for relocation benefits was substantially justified. At the time, the Department's determination had a reasonable basis in law and in fact. When the Department and Gass entered into the Right-of-Way Purchase Agreement and Addendum and attached the Inventory as Exhibit "A" thereto, the Department believed that it had paid Petitioner, through Gass, those monies to which Petitioner was entitled related to the 20 categories/items listed in the Inventory. The Department did not foresee that Petitioner would be entitled to additional payments regarding those same items because language added to the Department's standard form contract increased the ambiguity in that document so that there was never a "meeting of the minds" as to whether the 20 categories/items listed in the Inventory were agreed to be real property acquired by the Department in the Right-of-Way Purchase Agreement or were agreed to be personal property and the subject of relocation benefits. Accordingly, circumstances exist which would make the award of attorney's fees and costs in this proceeding unjust.
The Issue Whether the decision to award the bid for Parcel No. 93S101, State Road 84 Spur, was in accordance with the governing rules and statutes or was arbitrary, capricious, or contrary to competition.
Findings Of Fact In October of 1993 the Respondent declared that a spur property located at State Road 84 (the subject matter of these proceedings) was a surplus parcel. Such property is comprised of two identifiable tracts identified in this record as parcel 101-A and parcel 101-B. The Respondent utilizes a manual entitled "Disposal of Surplus Real Property" as its guide for the procedures used to comply with statutory and rule provisions regarding the disposal of surplus parcels. Since 1993 the Department has made several attempts to market the spur property. Such attempts included offering parcel 101-A to the Petitioner for no consideration. As recently as October of 2000 the Department offered the spur property to the Petitioner at no cost. The offer did include some conditions but same did not materially affect whether or not Davie would or could accept the transfer. For whatever reasons, the Petitioner did not accept the offer. Subsequently, the Respondent withdrew the offer in writing. Additionally, the Respondent notified the Petitioner that it intended to make the spur property (both parcels) available to the public through the competitive bid process. It was contemplated that the bid process would allow any person from the public to competitively place bids for the subject property. Nevertheless, the Petitioner was advised that it would be given an opportunity to acquire the property. A letter of February 7, 2001, from the Department to the Petitioner advised the town of its right to acquire the property but did not in any manner prohibit or prevent the Town of Davie from bidding on the spur property. In fact, the Petitioner did not bid on the subject property. Further, the Petitioner did not and does not intend to purchase the subject property. The only way the Intervenor seeks to acquire the property is without cost. The Petitioner had actual knowledge of the Department's intention of making the property available through competitive bid. The Town of Davie did nothing to oppose the bid process. On May 30, 2001, the spur properties were advertised for competitive bidding with sealed bids to be opened by the Department on June 14, 2001. On June 21, 2001, the Town of Davie by and through its town administrator contacted the Department in order to exercise the town's right of refusal on the property. Accordingly, on June 25, 2001, the Respondent posted a notice stating it would reject all bids. On July 12, 2001, the Respondent notified the Petitioner that it had ten days to exercise its right to purchase the property. In connection with the proposed sale the Department offered the property to the Town of Davie at the approved appraised value of $1.9 million. The Petitioner made no counter-offer. Instead, on July 27, 2001, the Town of Davie responded to the offer stating it would accept the parcel for a public purpose for no consideration. Thereafter, the Respondent posted a "Revised Bid Tabulation" indicating it would award the spur property to the highest responsive bidder, the Intervenor. The Petitioner has not proposed to pay for the spur property. The Petitioner did not have an appraisal of the spur property prepared. The Petitioner did not bid on the spur property.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent enter a final order confirming the award of the spur property to the Intervenor. DONE AND ENTERED this 7th day of February, 2002, in Tallahassee, Leon County, Florida. J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of February, 2002. COPIES FURNISHED: Michael T. Burke, Esquire Johnson, Anselmo, Murdoch, Burke & George, P.A. 790 East Broward Boulevard, Suite 400 Post Office Box 030220 Fort Lauderdale, Florida 33303-0220 Joseph W. Lawrence, II, Esquire Vezina, Lawrence & Piscitelli, P.A. 350 East Las Olas Boulevard Suite 1130 Fort Lauderdale, Florida 33301 Brian F. McGrail, Esquire Department of Transportation Haydon Burns Building, Mail Station 58 605 Suwannee Street Tallahassee, Florida 32399-0450 Thomas F. Barry, Secretary Department of Transportation Haydon Burns Building 605 Suwannee Street Tallahassee, Florida 32399-0450 Pamela Leslie, General Counsel Department of Transportation Haydon Burns Building, MS 58 605 Suwannee Street Tallahassee, Florida 32399-0450
The Issue In this disciplinary proceeding, the issues are: Whether Respondent committed the violations alleged in the Amended Administrative Complaint issued by the Petitioner; and Whether disciplinary penalties should be imposed on Respondent if Petitioner proves one or more of the violations charged in its Amended Administrative Complaint.
Findings Of Fact Respondent, at all times material to this matter, was a state certified general real estate appraiser subject to the regulatory jurisdiction of the Petitioner. He started doing commercial appraisals in the early 1990s in Florida. Whitham was licensed on July 21, 2003. Petitioner issued Whitham license number RZ-2669, which expires on August 31, 2012. On or about January 17, 2006, First Priority Bank asked Whitham to prepare an appraisal for three parcels of land near Bradenton, Florida, for use by the bank in determining a collateral loan amount. At the time Whitham was requested to appraise the parcels, the market was extremely active. There was a very high demand for development sites, particularly for residential development sites. During the appraisal, Whitham developed a regional overview section for the appraisal report. The section summarized the region, history, and economics that had contributed to the evolution of bringing Sarasota and Manatee counties to their current state of desirability. Whitham obtained the information for the section from various published reports and compiled them into a summary of the region. Whitham's historical overview outlined subject matters all the way back to the 1980s. Each of the older references specified a date including the following portions of the report: * * * The Sarasota-Bradenton MSA is noted for its attractive barrier islands . . . all of which have been heavily developed over the last 50 years. Population growth in the MSA-49.3 between 1980 and 1995--has also spread eastward into the woodland area . . . * * * New office construction remained highly constrained through 1996 which had the effect of reducing existing inventories and increasing rents. Over the last 36 months office development particularly in suburban areas but also including the Bradenton and Sarasota CBDs has resumed. * * * In 1997, per capita income was estimated at $21,293, indicating an average annual gain of 3.97 percent, well above the rate of inflation. Whitham included a wrong city, Venice, in his regional overview. When referencing the circus, Whitham reported, "and the winter headquarters of Ringling Bros-Barnum & Bailey Circus (Venice)." Whitham also failed to make clear that Englewood is not an incorporated city and that North Port's entire boundaries lie within Sarasota county. Instead, Whitham reported in the overview section, " . . . the incorporated towns of Englewood and North Port lie in both Sarasota and Charlotte Counties." While preparing the appraisal report, Whitham properly used the highest and best use methodology to value the subject property for his appraisal by applying the four tests: physically possible,1 legally permissible,2 financially feasible,3 and maximally productive.4 In doing the analysis, Whitham used the direct sales comparison approach. He visited the sites and separated out the subject small parcel, 4.8 acres ("subject 1") that had the river frontage and analyzed that applying comparable sales 1 through Whitham used comparable sales 4 through 6 to perform a separate analysis of the 17-acre parcel ("subject 2") that was not connected to the riverfront site. Both subjects 1 and 2 were vacant parcels zoned Planned Development Residential (PDR). Whitham chose six comparable sales that were vacant and physically possible for residential use like the subject parcels at the time of the appraisal in 2006. When Whitham evaluated subject 1, he found it difficult to find waterfront or water view properties to compare to subject 1. As a result, he made proper adjustments to account for the dissimilarities he encountered under the substitution principle in order for the comparable sales to conform. Whitham determined comparable sale 1 was legally permissible because the zoning was Planned Development Projects ("PDP"), which provided for development either as residential or commercial. He further determined the property was financially feasible as the rate of growth in the market for residential property was at its peak. When Whitman used the substitution principle with comparable sale 1, he focused on two primary considerations: utility and desirability. Since the goal was a potential development and investment, not a completed developer product, Whitham compared the two with adjustments. When looking at the attributes, Whitham determined that traffic was an easy drive to either property and neither was particularly visible from a roadway. Comparable sale 2 was a small site zoned Planned Development Mixed Use, which allows for blending of residential and commercial uses within the same development. Whitham researched the commercial possibilities of comparable sale 2 in 2006, and the direction of the development had not been established. As a result, he concluded that it was financially feasible for residential. Comparable sale 3's direction of development also had not been finalized when Whitham did his appraisal and it was zoned for PDP. After finishing his analysis, Whitham was able to conclude that comparable sales 1 through 3 were financially feasible. Whitham made the determination based on the tenor of the market being good for residential property, which each comparable could become. He then concluded that it was therefore financially feasible for each comparable site to be developed as residential, which would have been both financially feasible and maximally productive. Whitham evaluated subject 2 against comparable sales without waterfronts, water access, and water views. Comparable sales 4, 5, and 6 were either zoned General Agriculture District or Agricultural, which both allowed for general agricultural- related, normal activity and co-existence of other uses generally consistent with agricultural activities including rural residential development. Whitham used comparable sales 4, 5, and 6, since all had proper zoning, which meant residential was allowed like the subject 2 parcel and met the physically possible and legally permissible portion of the tests. Further, each was financially feasible since the strength in the market at the time was residential sites, which would provide for maximal productivity. Whitham summarized how each of the six comparable sales satisfied the four test criteria for the direct sales comparison approach in his appraisal report land sales summary and grid.5 On or about January 28, 2006, after completing his appraisal analysis, Respondent signed and communicated the appraisal report, for the property commonly known as ±4.76, ±17, and ±0.6 Acre Parcels UAs Vacant, Mill Creek Road, Bradenton Florida 34212. Whitman's report concluded in the Highest and Best Use section of the appraisal report that "Our assessment of highest and best use for the subject is: As Vacant: Residential development in accordance with the PDR zoning." In 2009, after a complaint was filed by Ronald Carr, the Department opened an investigation on Whitham regarding the January 2006 appraisal report. Dennis Black ("Black") was hired as an expert State Certified General Real Estate Appraiser to review Whitham's appraisal report. As a result of Black's conclusions on or about October 27, 2009,6 the Department charged Whitham in a four-count Administrative Complaint. The Charges: In Count I, Petitioner charges Respondent with having failed to exercise reasonable diligence in developing an appraisal report in violation of section 475.624(15), Florida Statutes. In Count II, Petitioner charges Respondent with fraud, misrepresentation, concealment, culpable negligence or breach of trust in any business transaction in violation of section 475.624(2). In Count III, Petitioner charges Respondent with failing to retain, for at least five years, original or true copies of any contracts engaging the appraiser's services, appraisal reports, and supporting data assembled and formulated by the appraiser in preparing appraisal reports in violation of section 475.629. In Count IV, Petitioner charges Respondent with making misleading, deceptive, or fraudulent representations in or related to the practice of the licensee's profession in violation of section 455. 227(1)(a).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulations, Division of Real Estate, enter a final order that finds Respondent not guilty as charged in Counts I, II, III, and IV of the Amended Administrative Complaint. DONE AND ENTERED this 14th day of September, 2011, in Tallahassee, Leon County, Florida. S JUNE C. McKINNEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of September, 2011.
Findings Of Fact Based upon all of the evidence, including the pleadings and attachments thereto, the following findings of fact are determined: Background This case involves a challenge by petitioner, William Markham, as Broward County Property Appraiser, to the validity of proposed rule 12D-8.0062, Florida Administrative Code. The rule is being proposed for adoption by respondent, Department of Revenue (DOR). That agency has the statutory responsibility of supervising the assessment and valuation of property and approving each assessment roll submitted by the county property appraisers. By law, all property is to be valued as of January 1 for the tax year in question. Unless DOR grants an extension for good cause, the property appraiser is required to complete the assessment roll by the following July 1 and submit it to DOR for approval on or before that date. The DOR executive director then approves or disapproves the rolls, in whole or in part. Roll approval is predicated upon substantial compliance with the requirements of the law relating to the form of the roll and just value, and upon full compliance with any administrative orders issued by DOR. The proposed rule codifies standards and establishes procedures relating to the assessed value of homestead property on the tax roll from year to year. On November 3, 1992, the voters approved an amendment to Article VII, Section 4(c) of the Florida Constitution. The amendment was described as follows in the ballot summary: Homestead Valuation Limitation Providing for limiting increases in homestead property valuations for ad valorem tax purposes to a maximum of 3 percent annually and also providing for reassessment of market values upon changes in ownership. As approved by the electorate, section 4(c) reads as follows: All persons entitled to a homestead exemption under Section 6 of this Article shall have their homestead assessed at just value as of January 1 of the year following the effective date of this amendment. This assessment shall change only as provided herein. Assessments subject to this provision shall be changed annually on January 1st of each year; but those changes in assessments shall not exceed the lower of the following: three percent (3 percent) of the assessment for the prior year. the percent change in the Consumer Price Index for all urban consumers, U. S. City Average, all items 1967 = 100, or successor reports for the preceding calendar year as initially reported by the United States Department of Labor, Bureau of Labor Statistics. No assessment shall exceed just value. After any change of ownership, as provided by general law, homestead property shall be asses- sed at just value as of January 1 of the following year. Thereafter the homestead shall be assessed as provided herein. New homestead property shall be assessed at just value as of January 1st of the year following the establishment of the homestead. That assessment shall only change as provided herein. Changes, additions, reductions or improve- ments to homestead property shall be assessed as provided for by general law; provided, however, after the adjustment for any change, addition, reduction or improvement, the property shall be assessed as provided herein. In the event of a termination of homestead status, the property shall be assessed as provided by general law. The provisions of this amendment are severable. If any of the provisions of this amendment shall be held unconstitutional by any court of competent jurisdiction, the decision of such court shall not affect or impair any remaining provisions of this amendment. The new amendment generally requires that all homestead property be assessed at just value on January 1 following the effective date of the amendment. Thereafter, the assessed value is to be increased by 3 percent or the change in the Consumer Price Index (CPI) percentage, whichever is lower, not to exceed just value. If there is a change in ownership, however, the amendment requires that the property be assessed at its just value on the following January 1. Subsequently, and until the next change in ownership, the limitation will apply. At the same time, when changes, additions, reductions or improvements to homestead property occur, the value of such changes will be assessed as provided by general law. After this adjustment is made, the assessment on the property as a whole is subject to the annual limitations. In 1994, the legislature implemented the new amendment by enacting Section 193.155, Florida Statutes. The relevant portion of the new statute reads as follows: 193.155 Homestead Assessments. - Homestead property shall be assessed at just value as of January 1, 1994. Property receiving the homestead exemption after January 1, 1994, shall be assessed at just value as of January 1 of the year in which the property receives the exemption. Thereafter, determination of the assessed property is subject to the following provisions: Beginning in 1995, or the year following the year the property receives homestead exemption, whichever is later, the property shall be reassessed annually on January 1. Any change resulting from such reassessment shall not exceed the lower of the following: Three percent of the assessed value of the property for the prior year; or The percentage change in the Consumer Price Index for All Urban Consumers, U. S. City Average, all items 1967 = 100, or successor reports for the preceding calendar year as initially reported by the United States Department of Labor, Bureau of Labor Statistics. * * * As can be seen, the statute mirrors the constitu- tional amendment. In response to this legislation, on March 3, 1995, DOR published in the Florida Administrative Weekly a notice of its intent to adopt new Rule 12D- 8.0062, Florida Administrative Code. A public hearing on the proposed rule was held on March 31, 1995. Based on oral and written comments received at that hearing, on April 10, 1995, DOR gave notice of its intent to change the rule in certain respects. As modified by these changes, the proposed rule in its entirety reads as follows: 12D-8.0062 Assessments; Homestead; Limitations. This rule shall govern the determination of the assessed value of property subject to the homestead assessment limitation under Article VII, Section 4(c), Florida Constitution and section 193.155, F. S., except as provided in rules 12D-8.0061, 12-8.0063, and 12D-8.0064, relating to changes, additions or improvements, changes of ownership, and corrections. Just value is the standard for assessment of homestead property, subject to the provisions of Article VII, Section 4(c), Florida Constitution. Therefore, the property appraiser is required to determine the just value of each individual home- stead property on January 1 of each year as provided in section 193.011, F. S. Unless subsections (5) and (6) of this rule require a lower assessment, the assessed value shall be equal to the just value as determined under subsection (2) of this rule. The assessed value of each individual home- stead property shall change annually, but shall not exceed just value. Where the current just value of an individual property exceeds the prior year assessed value, the property appraiser is required to increase the prior year's assessed value by the lower of: Three percent; or The percentage change in the Consumer Price Index (CPI) for all urban consumers, U. S. City Average, all items 1967 = 100, or successor reports for the preceding calendar year as initially reported by the United States Department of Labor, Bureau of Labor Statistics. If the percentage change in the Consumer Price Index (CPI) referenced in paragraph (5)(b) is negative, then the assessed value shall be the prior year's assessed value decreased by that percentage. The assessed value of an individual homestead property shall not exceed just value. Sections 195.027(1) and 213.06(1), Florida Statutes, are cited as the specific authority for adopting the new rule. The former statute requires that DOR adopt "such rules and regulations (to ensure) that property will be assessed, taxes will be collected, and the administration will be uniform, just, and otherwise in compliance with the requirements of the general law and the constitution." Sections 193.011, 193.023, 193.155, 196.031 and 213.05, Florida Statutes, are given as the law implemented. It is clear, however, that section 193.155 is the principal law being implemented. As clarified at hearing, petitioner does not challenge subsections (1) through (4) and (7) of the proposed rule. Rather, he alleges that subsection of the rule is arbitrary and capricious and conflicts with the law implemented. He also contends that subsection (6) is vague. Finally, he contends that subsection (5) conflicts with Article VII, Section 4(c) of the Florida Constitution. Statutory Grounds Concerning Subsection (5) To avoid being found arbitrary and capricious, the proposed rule must be supported by facts and logic and adopted with thought and reason. Aside from argument of petitioner's counsel, there is no evidence to support the notion that the rule lacks a factual and logical underpinning or is not rational. Indeed, because subsection (5) of the rule simply tracks the provisions found in the law implemented, that is, Sections 193.155(1)(a) and (b), Florida Statutes, it cannot be arbitrary and capricious. At the same time, by parroting the statutory language, subsection (5) comports with the law implemented. Accordingly, subsection (5) of the rule is deemed to be a valid exercise of delegated legislative authority. Is Subsection (6) of the Rule Vague? Subsection (6) of the rule reads as follows: If the percentage change in the Consumer Price Index (CPI) referenced in paragraph (5)(b) is negative, then the assessed value shall be the prior year's assessed value decreased by that percentage. Through argument of counsel, petitioner contends that the foregoing provision is "badly worded" and that "a reasonable man can(not) read . . . that rule, and know what it means." The language in the rule is plain and unambiguous. It indicates that if the percentage change in the CPI is negative, then the prior year's assessed value would be decreased. Indeed, the clarity of this language becomes even more evident when reading subsections (5) and (6) together. Subsection (5) requires an increase to the prior year's assessed value in a year where the CPI is greater than zero. Conversely, subsection (6) spells out the requirements when the CPI is negative. This is exactly the result required by the statute and Constitution in the event of a negative percentage change in the CPI. Accordingly, the contention that the rule is impermissibly vague is deemed to be without merit. Does Subsection (5) Conflict with the Constitution? Finally, petitioner contends that subsection (5) conflicts with Article VII, Section 4(c) of the Florida Constitution. More specifically, he argues that the rule conflicts with the "intent" of the framers of the ballot initiative, and that a third limitation relating to market value or movement, and not contained in the amendment itself, or even in the ballot summary, should be incorporated into the language of the rule in order to make it compatible with the constitution. He agrees, however, that subsection (5), as now written, does not conflict with the actual language found in the amendment. To be constitutionally infirm in the context of petitioner's challenge, subsection (5) would have to contain provisions which depart from the language in the amendment. Because the subsection essentially tracks the language in Section 193.155, Florida Statutes, which in turn tracks the language of the amendment, it is found that the rule does not conflict with the constitution.
The Issue The issues in this case are whether Respondent violated the provisions of Section 475.624(2), (14) and (15), Florida Statutes (2006)1/, as alleged in the Administrative Complaint, and if so, what penalty should be imposed?
Findings Of Fact The Department of Business and Professional Regulation, Division of Real Estate, is the state agency charged with the licensing and regulation of property appraisers in the State of Florida, pursuant to Section 20.165 and Chapters 455 and 475, Florida Statutes. Respondent, James Lester, Jr., is a Florida state certified general appraiser, holding license number RZ2783. He has been licensed by the Florida Real Estate Appraisal Board since 1991, initially holding a certified residential appraisal license and then a general appraisal license. Kenneth Ardire and Bradley Scott Bozeman formerly worked in the office referred to as J. Lester Company. The business was owned by Respondent's father. Bozeman was a residential appraiser and Ardire was a registered trainee appraiser supervised by Bozeman. During the time material to this Amended Administrative Complaint, Respondent did not act in a supervisory capacity with respect to either Bozeman or Ardire. Neither man currently works for the firm, and Bozeman's appraiser's license has been revoked. In February 2006, Ardire and Bozeman prepared a vacant land appraisal report (Report 3) related to property located on Highway 71 in White City, Florida, for Vision Bank. Respondent was not involved in the preparation of the vacant land appraisal and did not sign the report. Vision Bank also requested a subdivision analysis of the property. Ardire and Bozeman were assigned the report regarding the subdivision analysis because they had prepared the prior report on the same property. They were assigned to this task by an employee in the office other than Respondent. Preparation of a subdivision analysis is considered a commercial appraisal, as opposed to a residential appraisal. Neither Ardire nor Bozeman is licensed to prepare commercial appraisals. For reasons that are unclear, Ardire provided a "draft" report to Vision Bank, which shall be referred to as Report 2. Report 2 is unsigned and contains only the names of Bozeman and Ardire. Report 2 was provided by Vision Bank to Donald Giles, another licensed appraiser. Based on his review of Report 2, Giles filed a complaint with the Department. The complaint was identified as DBPR Case No. 2007-3522. In response to a request from the Department, Bozeman supplied to DBPR a copy of what is now referred to as Report 1 and its supporting work papers. This report indicates that it was prepared by Respondent, Bozeman and Ardire. Based on this report and workfile, DBPR Case No. 2008-1566 (the current proceeding) was initiated against Respondent. Neither report has numbered pages. Reports 1 and 2 differ in the following ways: Report 1 lists all three appraisers, with purported signatures for each. Report 2 lists only Ardire and Bozeman and contains no signatures. However, both reports state on the second page of the cover letter that "the appraisals attached were written, valued, analyzed and concluded by Kenneth Ardire and Bradley Scott Bozeman." The cover letter for Report 1 is on company letterhead, and is addressed to Vision Bank. The cover letter for Report 2 is on plain paper, and is addressed to Capital City Bank, at the same address listed for Vision Bank. The first page of Report 2 lists Vision Bank as the intended user. On the page labeled "Extraordinary Assumptions," Report 2 contains a sixth assumption which states: "The appraiser completing this assignment has a small interest in the property. However, the appraiser was not biased in his final conclusion of value." This assumption is omitted in Report 1. The certification page in Report 2 also lists Bozeman as having a minor interest in the property, lists Ardire and Bozeman but contains no signatures. The certification page for Report 1 has no reference to Bozeman's interest and has three purported signatures (Ardire, Bozeman and Respondent). On the page entitled Certificate of Value, Report 1 has three signature blocks and three purported signatures (Ardire, Bozeman, and Respondent). Report 2 contains two signature blocks (for Ardire and Bozeman) but no signatures. The third paragraph of the section entitled "Approaches to Value Omitted" in Report 2 contains the following sentences: "The market approach is unique since not all properties are alike. In this case the appraiser compared an area in Lands Landing in Wewahitchka and Honey Hill Subdivision in Wewahitchka." These two sentences are omitted from this section of the report in Report 1. With respect to the Highest and Best Use Discussion, the first two pages in both reports are identical. Report 1 includes an additional two pages entitled "Introduction to the Appraisal Process," which appears to be general information related to the appraisal process as opposed to specific information related to the appraisal performed. The written information contained in the "Public and Private Restriction" section is identical. However, Report 1 also includes maps and pictures of the area. Both reports contain the Land Appraisal Report (Report 3) signed by Ardire and Bozeman. Report 1 contains additional information with respect to the vacant land report not included in Report 2. On the page labeled "Land Sales Comparison Chart," under the Section entitled "Reconciliation and Land Value Estimate," Report 2 contains the sentence, "All the sales are zoned for similar use and felt to have the same potential for use as the subject." This sentence is omitted from Report 1. On the page labeled "Income Approach," Report 2 contains the sentence, "Method 2 is the financing and development method." This sentence is omitted in Report 1. Report 1 contains a blank page entitled "Addendum" followed by pages from a book with a heading "Subdivision Analysis." While there are differences between Report 1 and Report 2, they do not make a significant difference in terms of the quality and usefulness of the reports. Section 475.628, Florida Statutes, requires that appraisers comply with the USPAP. Section 475.628 was last amended in 1998, and was enacted in 1991. USPAP is adopted by the Appraisal Foundation, which is authorized by Congress as the Source of Appraisal Standards and Appraiser Qualifications. Pursuant to Section 475.611(1)(q), Florida Statutes, "Uniform Standards of Professional Appraisal Practice" means the most recent standards approved and adopted by the Appraisal Standards Board of the Appraisal Foundation. Section 475.611 was also enacted in 1991, and the language of this subsection has been unchanged, although renumbered, since that time. To this end, the Department has submitted as Exhibit 5 the USPAP Standards that became effective January 1, 2005. The most recent amendments for each section of the Standards is reflected on page four of the exhibit. None of these amendments relevant to these proceedings occurred prior to 1998. The Department alleges that Report 1 and the workfile for the report do not conform to several components of the USPAP standards in effect in 2005. Specifically, the Conduct portion of the Ethics Rule provides in part that "[a]n appraiser must not communicate assignment results in a misleading or fraudulent manner. An appraiser must not use or communicate a misleading or fraudulent report or knowingly permit an employee or other person to communicate a misleading or fraudulent report." Report 1 violated this section of the Ethics Rule contained in USPAP in that it was difficult for a reader of the report to determine exactly what was being appraised. Moreover, the inclusion of the gross sell-out amount on the first page, described as "potential gross income" in bold type is also misleading, because non- appraisers would infer that the potential gross income was the concluded value of the property. The Recordkeeping portion of the Ethics Rule addresses the need for appraisers to keep a workfile for each appraisal. The rule provides in pertinent part: An appraiser must prepare a workfile for each appraisal, appraisal review, or appraisal consulting assignment. The workfile must contain: the name of the client and the identity, by name or type, of any other intended users; true copies of any written reports, documented on any type of media; summaries of any written reports or testimony, or a transcript of testimony, including the appraiser's signed and dated certification; and all other data, information, and documentation necessary to support the appraiser's opinions and conclusions and to show compliance with this Rule and all other applicable Standards, or references to the location(s) of such other documentation. With respect to Report 1, the workfile does not include documentation regarding marketing information for Gulf County, as listed in the report, and also lacks documentation to support any highest and best use analysis, including the four criteria necessary to establish the highest and best use for the property. It also lacks documentation to support the statements in Report 1 regarding the respective public and private restriction section, and lacks any plans or specifications to indicate the type of infrastructure proposed for the subdivision. The workfile also lacks documentation to support the income approach used, and contains no information to support the construction costs, closing costs, real estate taxes, expenses or other calculations used in the Calculations and Comments Section of Report 1. Also missing is any documentation from the identified engineers to support the data used for construction costs. Finally, there is also no documentation to support the data or calculations in the two-year discounted cash flow analysis in Report 1. With respect to Report 3, the workfile lacks documentation to support the single family price ranges in the neighborhood section of the report; lacks documentation to support the information in the Market Data Analysis Section; and lacks any multiple listing services (MLS) data or public records for the comparable sales used in the report. The Amended Administrative Complaint refers to the Scope of Work Rule. This rule is in actuality entitled Standard 1: Real Property Appraisal, Development and states: "In developing a real property appraisal, an appraiser must identify the problem to be solved and the scope of work necessary to solve the problem, and correctly complete research and analysis necessary to produce a credible appraisal." Report 1 identifies the problem as "estimating the value of the proposed subdivision and determines [sic] a value on a typical lot." However, the Report does not identify the scope of work and does not complete the research and analysis necessary to complete the appraisal properly. Standards 1-1(a), (b) and (c) require the following: In developing a real property appraisal, an appraiser must: be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal; not commit a substantial error of omission or commission that significantly affects an appraisal; and not render appraisal services in a careless or negligent manner, such as by making a series of errors that, although individually might not significantly affect the results of an appraisal, in the aggregate affects the credibility of those results. Report 1 violates these standards because, as discussed more fully below, the report contains several significant errors, including the failure to discuss the four criteria for analyzing highest and best use. Standards Rule 1-2(d) requires that in developing a real property appraisal, an appraiser must identify the effective date of the appraiser's opinions and conclusions. Report 1 stated that the value date of the report and the date of the report itself, were the same as the date of the inspection of the property, June 7, 2006. Mr. Grimes, the Department's expert, explained that this was a violation of the standard because in a situation where the appraiser is estimating a value for a project that is not now in existence, the hypothetical nature of the valuation must be adequately explained, and the effective date of the appraisal should reflect the date in the future when the subdivision is scheduled to be completed. Mr. Grimes' testimony is credited. Standards Rule 1-3 requires the following: When the value opinion to be developed is market value, and given the scope of work identified in accordance with Standards Rule 1-2(f), an appraiser must: identify and analyze the effect on use and value of existing land use regulations, reasonably probable modifications of such land use regulations, economic supply and demand, the physical adaptability of the real estate, and market area trends; and develop an opinion of the highest and best use of the real estate. Report 1 does not provide an analysis of the highest and best use of the property. While the factors related to such an analysis are defined, there is no discussion of these factors related to the actual property being appraised. Standards Rule 1-4(a),(c) and (g) provides: In developing a real property appraisal, an appraiser must collect, verify, and analyze all information applicable to the appraisal problem, given the scope of work identified in accordance with Standards Rule 1-2(f). (a) When a sales comparison approach is applicable, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion. * * * When an income approach is applicable, an appraiser must: analyze such comparable rental data as are available and/or the potential earnings capacity of the property to estimate the gross income potential of the property; analyze such comparable operating expense data as are available to estimate the operating expenses of the property; analyze such comparable data as are available to estimate rates of capitalization and/or rates of discount; and base projections of future rent and/or income potential and expenses on reasonably clear and appropriate evidence. Comment: In developing income and expense statements and cash flow projections, an appraiser must weigh historical information and trends, current supply and demand factors affecting such trends, and anticipated events such as competition from developments under construction. * * * (g) An appraiser must analyze the effect on value of any personal property, trade fixtures, or intangible items that are not real property but are included in the appraisal. While the Amended Administrative Complaint refers to all three subparagraphs listed above, the evidence presented dealt solely with the deficiencies related to Standards Rule 1- 4(c). Mr. Grimes opined that with respect to Report 1, the income approach to the cash flow analysis did not support the conclusions, projections on income, and with respect to this project, the sale of lots over a period of time. The statements made in the report are conclusory in nature, with little or no explanation of the basis for forming the conclusions. Standards Rule 1-6(a) and (b) provides: In developing a real property appraisal, an appraiser must: reconcile the quality and quantity of data available and analyzed within the approaches used; and reconcile the applicability or suitability of the approaches used to arrive at the value conclusion(s). Report 1 indicates that there are three traditional approaches to value in the valuation process: the cost approach, the direct sales comparison approach, and the income capitalization approach. While the report states that all three approaches will be considered, the appraisal report omits any discussion of the cost approach and the direct sales comparison approach. By omitting these approaches from the analysis, the report omits an important "check and balance" process that would have caught what Mr. Grimes considered to be a substantial error in the discounted cash flow analysis. Standards Rule 2-1 provides: Each written or oral real property appraisal report must: clearly and accurately set forth the appraisal in a manner that will not be misleading; contain sufficient information to enable intended users of the appraisal to understand the report properly; and clearly and accurately disclose all assumptions, extraordinary assumptions, hypothetical conditions, and limiting conditions used in the assignment. Hypothetical conditions and extraordinary assumptions are considered to be two different things. As noted in Report 1, an extraordinary assumption is defined as an assumption that presumes certain information to be factual. If found to be false, the information could alter the appraiser's opinions or conclusions. A hypothetical condition is something that assumes conditions contrary to known facts about physical, legal or economic characteristics of the property being appraised, or about conditions external to the property, such as market conditions or trends, or about the integrity of data used in the analysis. Hypothetical conditions and extraordinary assumptions should be explained separately in an appraisal report, so that the intended user is in a better position to understand the true value of the appraisal. Report 1 lists 6 conditions and assumptions all together. They are that the proposed subdivision is based on 21 lots; that all plans and specs (unidentified) are to be approved and accepted by all governmental authorities; all work will be completed in a quality workmanship manner with quality materials; assumed the subject property can be developed as proposed; and information on the number of lots was made available by the engineer Bailey, Bishop and Lane. The report does not differentiate which are considered hypotheticals and which are considered extraordinary assumptions. The report does not contain sufficient information to enable the intended user of the appraisal to understand the report and to use it for its intended purpose, i.e., to determine whether the highest and best use for the land is subdivision development. Standards Rule 2-2(b) provides in pertinent part: Each written real property appraisal report must be prepared under one of the following three options and prominently state which option is used; Self-Contained Appraisal Report, Summary Appraisal Report, or Restricted Use Appraisal Report. * * * (b) The content of a Summary Appraisal Report must be consistent with the intended use of the appraisal and, at a minimum: * * * state the intended use of the appraisal; summarize information sufficient to identify the real estate involved in the appraisal, including the physical and economic property characteristics relevant to the assignment; * * * (vi) state the effective date of the appraisal and the date of the report; * * * summarize the information analyzed, the appraisal procedures followed, and the reasoning that supports the analyses, opinions, and conclusions; state the use of the real estate existing as of the date of value and the use of the real estate reflected in the appraisal; and, when reporting an opinion of market value, summarize the report and rationale for the appraiser's opinion of the highest and best use of the real estate; . . . Report 1 states that the intended use of the appraisal is to determine the fair market value of the property. It also provides sufficient information to identify the real estate involved. However, as noted at finding of fact 18, the effective date of the appraisal, the date of the property inspection and the date of the report are the same. Where, as here, the appraisal is determining value of a proposed subdivision as completed at some future time, the date of the report cannot be the effective date of the appraisal. The report fails to have any discussion or analysis with respect to the property's highest and best use, and has little or no reasoning or analysis to support the opinions and conclusions contained in the report. Report 1 contains what purports to be Respondent's signature. Clearly, by signing an appraisal report, a property appraiser takes responsibility for the contents of that report. When speaking with the investigator during the investigation of this case, Respondent stated that he had little recollection of the appraisal, but given that his signature was on it, he acknowledged responsibility for whatever errors it contained. However, at hearing, Respondent disputed that it was actually his signature. Respondent's testimony that the signatures contained in Report 1 are not his is credited. Included in the record of this proceeding are other documents, including past appraisals prepared by Respondent, that contain what he acknowledges to be his signature. After carefully reviewing all of the signatures in evidence, it cannot be said with any degree of certainty that the signatures included in Report 1 are indeed the signatures of Respondent.2/
Recommendation Upon consideration of the facts found and conclusions of law reached, it is RECOMMENDED that: The Florida Real Estate Appraisal Board enter a final order dismissing the Amended Administrative Complaint. DONE AND ENTERED this 24th day of November, 2009, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of November, 2009.
